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SMSFs cash out of cash for managed funds

Self managed super fund (SMSF) trustees continued to decrease their allocation to cash during the March 2013 quarter while exposure to managed funds increased for the first time in two years, according to the latest Multiport SMSF Investment Patterns Survey.

Self managed super fund (SMSF) trustees continued to decrease their allocation to cash during the March 2013 quarter while exposure to managed funds increased for the first time in two years, according to the latest Multiport SMSF Investment Patterns Survey.

The quarterly Multiport SMSF Investment Patterns Survey covers around 1,950 funds, a sample of the SMSFs Multiport administers, and the investments held at 31 March 2013. The assets of the funds surveyed represent approximately $1.8 billion.

AMP SMSF Administration Head of Technical Services Philip LaGreca said the overall allocation to cash fell 1 per cent during the March quarter to 23.4 per cent, its lowest point since the same quarter last year when cash holdings were at 22.9 per cent.

“Lower interest rates during the quarter and the possibility of further cuts have meant cash has become a less attractive investment, so trustees are ‘cashing out’ of cash and looking for other homes for their money.

The total fixed interest asset allocation remained unchanged at 6.6 per cent compared to the December quarter. However, there was a reduction in exposure to longer term deposits – dropping 0.6 per cent to 1.4 per cent in the March quarter.

“The fall in longer term deposits is most likely the result of unattractive interest rates for new longer term deposits,” Mr LaGreca said.

Meanwhile, exposure to managed funds increased for the first time in two years, rising from 15.8 per cent in the December quarter to 17.4 per cent in the March quarter.

Mr LaGreca continued: “The lift in the use of managed funds has occurred in the fixed interest and Australian equities sectors, possibly related to the search for an alternative to cash and term deposits, combined with a little more optimism in equity markets.

“Managed funds seem to be the preferred method of investing in overseas markets but there was also an increase in Australian equities, possibly due to softening in the mining sector leaving investors unsure of which stock to invest in.”

The March quarter also saw a significant increase in the use of limited recourse borrowing arrangements for direct property. At the end of the March quarter, 34 per cent of direct property holders had a gearing arrangement in place, up 5 percentage points on the December quarter.

However, the average loan amount held by SMSFs fell in the March quarter to $248,000 compared to $268,000 for the previous quarter.

“Even though the number of loans is increasing, the loan value appears to be decreasing. This probably reflects on more conservative loan to value ratios, particularly with commercial property,” Mr LaGreca continued.

Average SMSF contributions for the March quarter increased slightly to $6,805 compared to $6,585 for the previous quarter. The average contribution for the March 2013 quarter is on par with the average contribution amount for the March 2012 and March 2011 quarters.

Pooled funds offer a way for investors to own a partial share of a range of real estate assets, helping to spread risk and increase diversification.

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